Do you sell retail items in your self storage facility?
I think you’re missing the boat if you don’t put a real focus on retail sales.
I know, I know…you’re in the business of renting units and selling retail items or renting trucks is a hassle that takes you away from your core business…. or something like that. Right?
If that, or something like that, is your thinking, then I suggest you and I are in two totally different businesses.
My main job is to maximize the return a self storage facility can generate; and creating wealth through the facility by increasing the income growth over expense growth each year.
Retail sales in a facility can have a big impact on that.
Let’s look at the numbers.
Let’s say you have a small to medium sized facility that is stabilized. What are your move-in numbers each month? Let’s say 35 move-ins per month for this exercise.
Now let’s say that you work with your manager (or yourself) and create a game that each move-in will average $15 in retail sales. For us that is most likely just a single disk lock.
Ok, here is the math:
35 (move-ins) x $15 = $525 in sales per month
Not a killer, but $525 is real money in the bank. Our cost for locks are around $3.00 per lock, so you made a profit of 500%, but set that aside for the moment.
If you could in fact average just $15 per move-in in retail sales (very easy to do if you sell boxes, packing tape, etc.), that begins to add up over the course of a year. Let’s look at the math:
$525 (retail sales) x 12 (months) = $6,300
Again, not bad, but I know this isn’t going to change your lifestyle.
However, appraisers, listing agents, and most importantly buyers will add this income to the income line that they use to calculate a value on the facility.
What are CAP Rates today? 7%? 6%? Well, lets be very conservetive and use an 8% CAP rate. If you used an 8% CAP rate to estimate the value of your facility today, and you had an additional $6,300 in income, what would that add in value to your facility? Well, lets look at the math:
$6,300 divided by .08 = $78,750
That is why we put an emphasis on retail sales.
If you can get your average retail sale to $15 per move-in, and you average 35 move ins per month, you just increased the value of your facility $78,750 (or close to that).
Here’s another hot tip – $15 per move in is low.
Just start there if you haven’t started focusing on self storage retail yet. Then each year up the game some. Create incentives. Have fun with it. Yes, you can have fun as you create wealth.
What do I sell?
Well, I’ve said I’ll sell TV’s if people will buy them and I can make money – but usually people can get a better deal somewhere else on TV. When they’re in a self storage facility, people usually need moving and packing supplies, and oh yes, locks.
Offer your customer what they need. Boxes, tape, moving supplies, and locks. Try to sell a lock with every move in. It is not hard. We sell nothing but disk locks. Why? They are very hard to cut. It offers the best security a person can have.
If there is a mass break in at a facility, I guarantee you, the units that were broken into were the ones that didn’t have a disk lock.
Anyway, you can sell packing and moving supplies because that is what your customer needs.
Will they buy supplies there?
Yes…. if they think they’re not being ripped off and you’re not over charging them.
Here is how we address that issue:
- The number one thing we sell is a disk lock. So we price that lock close to what nearby retailers are selling them for.
- We then place a sign up with the prices of the nearby retailers. It may look like this:
- Home Depot: $18
- Lowes: $20
- Walmart: $12
- This Facility: $15
- We let them see just where we are in the pricing. We want to be just above Walmart or some other low discounter. That gives them a feel for our pricing and customers will transfer that to all other items we sell.
We try to price our locks so that we are slightly more expensive than the closest discount store. Our experience is that people will happily purchase retail items because they feel they are not being taken advantage of and they don’t have to drive around to get what they need.
And they aren’t being taken advantage of. They are being provided a service.
If you’re not putting energy into retail sales, perhaps it is time to start. If you are just getting into the self storage business, you now see the value of starting off with this as part of your business strategy.
You can create real wealth in this business by strategically thinking through your business strategy then implementing it.
It is fun and fulfilling as well as providing a great service for people.
Yes, its fun creating “true wealth.” Play around with this and develop your place in this game.
